Finding the Right Tax Advisor for Your Real Estate Investments

One of the reasons that people end up paying more than their fair share of taxes is because they simply don’t understand the tax code. Who can blame them though? With hundreds of thousands of pages, the tax code is written in a language all on its own. If you think I’m joking, you should really try to read the tax code. If you think reading Shakespeare was hard in high school, you may want to stay away from reading the code. Even for someone like myself who works within the IRS code and regulations day in and day out, I sometimes find myself on the verge of a mental breakdown when I am doing research within the tax code.

On some levels, it’s kind of like the DaVinci Code with unnecessarily complex wording that sometimes appear to have been designed to simply confuse you. This happened to me just yesterday in fact. I was working on a client case where I was trying to find out about strategies to help a real estate broker to be able to fund his retirement account without costing an arm and a leg to also fund for all his employees. After about an hour of reading through the various code sections, one referencing the next, and sometimes cross referencing other unrelated topics, I stopped myself when I realized that, in the midst of trying to “decode” the tax jargon, I had actually forgotten what question I was trying to answer in the first place.

How to Invest in Real Estate While Working a Full-Time Job

Many investors think that they need to quit their job to get started in real estate. Not true! Many investors successfully build large portfolios over the years while enjoying the stability of their full-time job. If that’s something you are interested in, then this investor’s story of how he built a real estate business while keeping his 9-5 might be helpful.

The Reason I Share This Story With You…

I want to let you know that you don’t need to feel bad when you find that you don’t understand taxes. Most American’s don’t. It’s not a stretch to say that even some tax preparers don’t understand taxes either. Take me for example. I am a CPA who specializes working with real estate investors. So I can say that I am fairly well versed when it comes to landmines and loopholes that real estate investors face. Terms like 1031 exchange, lease options, self-directed IRA, seller financing, and real estate professional are strategies that I work with on a daily basis.

But give me a manufacturing client and ask me to do their taxes? I may be as clueless as the next person.

You see, taxes is a very specialized field and has lots of specialties within itself….just like the medical field. A pediatrician goes to school and then through to residency to learn what he needs to know to treat kids. A heart surgeon spends years and years to learn everything he needs to know about how the heart functions so that he can take care of your heart in the most urgent situations.

So, Let me Ask You:

If you had a heart problem, you would not consider going to your dentist for treatment would you? I didn’t think so. So why would you work with a tax preparer that doesn’t specialize in your business or real estate?

It’s true that taxes are not usually a life and death situation as heart surgery. But it is your money….money that you work hard to earn day in and day out. So if you are not already working with someone who specializes in your business, make sure that you do so in the future. If you are in the medical practice, work with a tax advisor who specializes in working with physicians. If you own a manufacturing company, work with someone who understands all the loopholes that are available to manufacturers (again, not me). If you are a real estate investor, make sure that your CPA is someone who is well versed in real estate related loopholes.

Here Are a Few Tips That Can Help You to Easily and Quickly Find Out:

1. Avoid the glazed look: If your CPA has a glazed look when you start talking about real estate, you may be working with the wrong person. If you find yourself explaining your real estate transactions to your CPA year after year, then you may be working with the wrong advisor. Yes, we all do creative real estate transactions from time to time, but your CPA should know the basic transactions within your industry.

2. Who is the CPA?: It is ok for you to tell your CPA about a tax new idea you hear from time to time. Who knows, maybe you just attended a seminar and learned a new cutting-edge idea that your tax advisors hasn’t thought of yet. But if you are always the person bringing ideas to your CPA (i.e.: you feel like you are the CPA), then you may not be working with the right person.

3. Giving you leverage: Your tax advisor should be someone who can help you with more than just taxes. They should be able to also share with you what they see in the market, what other investors are doing that has been successful, or how other people have been successful in raising money. Your CPA should be able to let you leverage their knowledge and experience to supercharge your investing plans.

Taxes and finances are topics that are very private and personal to each of us. In addition to finding someone who specializes in working with people just like you, also make sure that you identify someone you trust and are comfortable with. Your advisors should be your friends and you need to be able to have open and honest communication with them in order to get the most value for your relationship and your financial well-being.

What have your experiences been when trying to find the right tax advisor?

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About Author

Amanda Han of Keystone CPA is a tax strategist who specializes in creating cutting-edge tax saving strategies for real estate investors. As real estate investors herself, Amanda has an in-depth understanding of the various aspects of investing including taxation, self-directed investing, entity structuring, and money-raising.

15 Comments

This is one area where I really lucked out. I asked a family friend years ago who she used. I have been with him ever since. Their costs are great. They answer questions year round. He knows wht I am talking about and most importantly can answer any questions I have. He says I am really smart too, so it is hard not to like that 🙂

Great article, Amanda, with good tips. Not sure if a comment is the right place to bring this up, or maybe you’ll write about it in the future, but I just learned of the Simplified Home Office Method of deduction that starts with 2013 taxes, where you merely deduct $5 per square foot of your home office space, up to a maximum of 300 square feet. What do you feel are the pros and cons of this, if any, or is it pretty straightforward for those with offices less than 300 s.f.? Thanks!

I wasn’t around BP back then, so I did miss it. So glad I asked – of course it’s not straightforward – it’s taxes haha! What a great recap, Amanda. So many things you brought up I hadn’t even considered. Appreciate it!

Very good points.
Another things to keep in mind is that as your business grows you might need to look for a new person. The one you have now might be perfect for what you are doing but if you change some of what you do in your business they might not know that area as well.

I just had this happen. Had an awesome guy that was very good with personal returns, smaller service businesses and rental real estate. Did a great job for us for years. When I started doing a lot of rehabs as well he didn’t have any experience with that (Which to his credit he said to me right away) and he did not do a great job on last years return. I recently consulted a CPA recommended by multiple colleagues with similar flip and hold businesses and he said we will save at least $12K with an amended return.

Not bashing my old guy at all. He was great for what he was well trained in. But not in what he wasn’t and when I changed I needed to change advisors as well.

Couldn’t agree more, I met with two CPA’s in the OC area and the first wasn’t sure about depreciation recapture tax and the second was fuzzy on passive income loss AGI limits.

I am about halfway through NOLO’s Landlord Deduction Guide and I knew more than these two CPA’s – what gives? I guess I need to find someone who specializes in RE but having trouble finding someone in my price range. I don’t make that much haha.

Unfortunately taxes are unnecessarily and overly complicated so this just means the person you spoke probably with does not have too many clients that deal with a lot of real estate. You may want to ask other local investor colleagues of yours or local REIA type groups to find recommendations of other tax advisors you can interview that fits your needs and your budget.